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You are here: BAILII >> Databases >> England and Wales High Court (Chancery Division) Decisions >> Moosa & Ors v Mawji [2024] EWHC 1638 (Ch) (28 June 2024) URL: https://www.bailii.org/ew/cases/EWHC/Ch/2024/1638.html Cite as: [2024] EWHC 1638 (Ch) |
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BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
PROPERTY TRUSTS AND PROBATE LIST (ChD)
Fetter Lane London, EC4A 1NL |
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B e f o r e :
____________________
(1) SALIM MOOSA (2) SHAUKAT MOOSA (3) GOOLAM HOOSEN MOOSA |
Claimants |
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- and – |
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KARIM ISSA MAWJI |
Defendant |
____________________
MR. SIMON ATKINSON and MR. THEO DIXON (instructed by Teacher Stern) for the Defendant
Hearing dates: 8, 11-15, 19-20 March 2024
____________________
Crown Copyright ©
Mr Ian Karet:
Introduction
The approach to evidence
The witnesses
The appointment - July 2000 and after
The legal framework
"Agency is the ?duciary relationship which exists between two persons, one of whom expressly or impliedly manifests assent that the other should act on his behalf so as to affect his legal relations with third parties, and the other of whom similarly manifests assent so to act or so acts pursuant to the manifestation."
"30. In Bristol and West Building Society v Mothew [1998] Ch 1 ("Mothew"), at 18, Millett LJ described a fiduciary as "someone who has undertaken to act for or on behalf of another in a particular matter in circumstances which give rise to a relationship of trust and confidence". Subsequently, in Arklow Investments Ltd v Maclean [2000] 1 WLR 594, Henry J, giving the judgment of the Privy Council, spoke at 598 of the concept of a duty of loyalty "encaptur[ing] a situation where one person is in a relationship with another which gives rise to a legitimate expectation, which equity will recognise, that the fiduciary will not utilise his or her position in such a way which is adverse to the interests of the principal". More recently, in Children's Investment Fund (UK) v Attorney General [2020] UKSC 33, [2022] AC 155, at paragraph 47, Lady Arden quoted with apparent approval (though adding in paragraph 48 that "[r]easonable expectation may not be appropriate in every case") the following passage from the judgment of Finn J, sitting in the Federal Court of Australia, in Grimaldi v Chameleon Mining NL (No 2) (2012) 200 FCR 296, at paragraph 177:
"a person will be in a fiduciary relationship with another when and in so far as that person has undertaken to perform such a function for, or has assumed such a responsibility to, another as would thereby reasonably entitle that other to expect that he or she will act in that other's interest to the exclusion of his or her own or a third party's interest".
Some years earlier, writing extra-judicially, Finn J had drawn attention to the relevance of asking "for what purpose one party has acquired rights, powers and duties in the relationship: to promote his own interests, the joint interest, or the interests of the other party alone", noting that the latter two indicate a fiduciary relationship: see "The Fiduciary Principle", in Equity, Fiduciaries and Trusts, ed. TG Youdan, 1989. Others have favoured somewhat different definitions or tests. For example, Paul B Miller has suggested that a fiduciary relationship "is one in which one party (the fiduciary) exercises discretionary power over the significant practical interests of another (the beneficiary)": see Philosophical Foundations of Fiduciary Law, ed. Gold and Miller, 2014, at 69.
31. There are certain settled categories of fiduciary relationship. For example, trustees, partners, company directors and solicitors are all considered to have fiduciary obligations. So too, normally, do agents. The word "agent" is used to describe persons fulfilling a variety of roles. A franchisee might be termed an "agent", but have no power to affect the legal relations of the franchisor and have an arm's length relationship with it. At the other end of the spectrum is an "agent" in the strictest sense: a person who has power to contract on behalf of the principal. The extent, if any, to which fiduciary duties are owed will be affected by the type of "agent" in question. In Eze v Conway [2019] EWCA Civ 88, Asplin LJ observed at paragraph 39 that "[a]lthough the relationship of principal and agent is a fiduciary one, not every person described as an 'agent' is the subject of fiduciary duties and a person described as an agent may owe fiduciary duties in relation to some of his activities and not others"."
"In my judgment, the touchstone for the imposition of fiduciary duties, on the particular facts and circumstances of any case, is to be found in Wilson J's formulation in Frame v Smith. As the Law Commission recognised, the key test is whether there is a legitimate expectation that one party will act in the interests of another, with discretion, power to act and vulnerability being indicators of such an expectation."
"… the defendant's liability to account for more than six years before the issue of the writ in Nelson v Rye depended on whether he was, not merely a fiduciary (for every agent owes fiduciary duties to his principal), but a trustee, that is to say, on whether he owed fiduciary duties in relation to the money…. The fact that the defendant was a fiduciary was irrelevant if he had no fiduciary or trust obligations in regard to the money. If this was the position, then the defendant was a fiduciary and subject to an equitable duty to account, but he was not a constructive trustee. His liability arose from his failure to account, not from his retention and use of the money for his own benefit, for this was something which he was entitled to do."
The appointment – discussion
Further developments
Integry and Taurin
The Foundations, Flemingo and the "private equity model"
i) Reviewing properties a client held and advising on actions for each, and how MGL would be remunerated;
ii) For properties to be sold there would be a timeline for disposal. For each "hold and enhance" property there would be a strategy, and such properties would be retained in the client entity to save transaction costs, taxes and fees;
iii) MGL would be entitled to 50% in the increase in value of new acquisitions in excess of acquisition costs, an annual management fee of 3-5% of the rental income and an initial fee on up to 3% of the purchase price; and
iv) If the acquisition was into a new entity, MGL/MGAG would own the new entity. A client would introduce financial contributions by way of a loan in exchange for 50% of the profit generated by the venture and MGL/MGAG would be entitled to 50% of the profit as its remuneration. None of the financial contributors were entitled to any shareholding in the acquiring entity or any participation in the management and decision making of that entity.
"MGL and MGAG's business model was to operate as a private equity specialist, whereby a Special Purpose Vehicle ('SPV') would own the asset being developed and managed, while unconnected third parties would participate as finance providers (as private equity providers). This funding would be by way of loans in return for a share of the profits resulting from the underlying transaction…."
i) Jacklin Investment Limited ("Jacklin"), which was owned 100% by Montague Goldsmith Investco, would acquire shares in a company called Ivy. Ivy owned 50% of Fleetsbridge LLP, which in turn owned the Hamworthy Engineering site in Poole. Jacklin would pay US$5,000 for the shares.
ii) Fenchurch would "cede it's (sic) loan account in Ivy in the sum of £2.625M" to Flemingo, which was to be owned by the Foundations. £525,000 of that amount had been provided by another company RA Holdings Limited ("RA").
iii) Ivy's 50% share in Fleetsbridge would then be transferred to Jacklin under "Group relief". Flemingo would enter into a "structured loan agreement" with Jacklin for £2.1M "based on a 6% priority return and 40% of the profits earned by Jacklin". RA would enter into a "structured loan agreement" for £525,000 at 6% and for 10% of the profits.
iv) MGAG would act as "authorised agents and coordinate the transactions" and would be "entitled to draw reasonable monies on eventual account of its fees. Jacklin would be entitled to 50% of the profits less the "6% priority return… less any fees paid to [MGAG]".
v) Flemingo and RA were responsible for "the annual company administration cost of Jacklin in their respective proportions".
Meeting in Zurich, September 2005
Further meetings
Sedes and MCE
2016 and after
Schedule Projects
Introduction
Accounts
Forest Hill
"Montague Goldsmith ("MG") to act as authorised agents and to coordinate negotiations with Sainsbury's and their agents to try and develop the existing store with surrounding land into a much larger and modern store.
MG entitled to draw reasonable monies during the project on account of its eventual share of fees.
Hillworth Associates Limited ("HA") and/or Rattan Investments Limited ("RI") will be entitled to 50% of sale proceeds of 42-48 London Road in excess of £3.75m (the agreed valuation at the time MG/HA/RI became involved in the transaction.
Any monies paid to Montague Goldsmith other than rent collection fees will be deducted from amounts due to Hillworth Associates Limited and/or Rattan Investments Limited."
Bruntcliffe
"Fenchurch Enterprises Inc (Fenchurch)
Re - Sale of shares in Conifer Investments Limited ("Conifer")
New company ("Newco") which will be 100% owned by Montague Goldsmith Investco, acquires shares in Conifer which owns Units 1-3, Bruntcliffe Trading Estate, Morley, Leeds, UK.
Shares to be purchased at par for US$5,000.
Fenchurch cedes it's loan account in Conifer in the sum of £2 525m to New Liechtenstein Holding company ("Holdco") which is owned by 3 M Foundations to be created.
The Leeds property to be transferred from Conifer to Newco under Group relief Holdco will enter into a structured loan agreement with Newco for £2.525m based on a 6% p.a. priority return and a percentage of the profits as follows:
-Investment 80% of profits earned by Newco in excess of £2.525m should the Leeds property be sold as an investment property with existing tenant.
— Redevelopment 50% of profits earned by newco in excess of £2.525m should the Leeds property be sold with enhance planning or redevelopment opportunity,
Montague Goldsmith AG (''MGAG") to act as authroised (sic) agents and co-ordinate the transactions.
MGAG entitled to draw reasonable monies during the project on account of it's (sic) eventual share of fees.
Any fees paid to MGAG will be deducted from profits retained by Newco under the redevelopment scenario. MGAG fees to be paid by Holdco under the investment scenario.
Holdco will be responsible for annual company administration cost of Newco."
Roebuck House and Clarence Mill
Introduction
Roebuck House
Clarence Mill
Discussion
Pescod Square
"Violet Investments Limited ("Violet) to pledge its Forest Hill property as security to facilitate a bank loan of £3m to fund the exchange of Boston.
Interest on loan to be serviced by developer. Violet to commit a further sum up to £300,000 to cover acquisition and on going costs of the transaction. Montague Goldsmith ("MG") to act as authroised agents and co-ordinate the transaction.
MG to be responsible for dealing with developer, bankers, lawyers, letting agents and all other relevant matters. MG Entitled to draw reasonable monies during the project on account of it's eventual share of fees.
Violet entitled to 2% per annum above UK base rate on cash monies introduced. Thereafter Hillworth Associates Limited (HA") and/or Rattan Investments Limited ("RI") will be entitled to 50% of the profits. Any monies paid to MG will be deducted from HA and or RI's share of profits.
Violet will not be entitled to a priority return on the on the £3m loan as the interest will be serviced by the developer."
Würzburg
Profit share
Loan Agreement
"Hope you and your family are all well. Thank you for your email to Shaukat regarding Würzburg Estates and hope that you could finalise same soon. As you are aware, we last met around mid-June 2012 in London after visiting Germany the day before. Since then I only received one balance sheet from you for Würzburg dated 31/03/2014. As you are aware we 3 brothers are restructuring our assets and I have been under extreme pressure to account for our investments. I require some source documents from you to hand to Shaukat who will meet you in a few days. Kindly please do not feel that this information is being requested for any other reason, but only for my records for our relationship to be open and fair I require the following information & documentation
1) Audited annual financial statements prior to 2014 and to date.
2) Copies of bank statements for mortgage bond from inception to date.
3) Copy of tenant all Leases
4) Copies of the signed purchase agreement by our company.
5) Copy of signed sale agreement for the properties and documents proving the delay in the transfer.
6) Copies of the cash flow statement from inception.
7) Full details and proof of all shareholder loans. Also note that my records for our loan does not refer correctly in the 2014 balance sheet. As per my records it should read as 9,500,000 Euros and 600,056 Pounds Sterling.
8) Bank statements for the company since inception.
Please also provide me details for the last deposit of approx. 2,500,000 British Pounds made to our account with U B S. Kindly also confirm we are owed by Southampton & Hull 77,187.00 British Pounds and for South African debt of 53,440.00 British Pounds
Kindly let me also have a copy of your loan account with Southampton and Hull.
As far as the Cherry Tree is concerned, you were to check and revert.
My appologies for the inconvenience and hope this does not affect our relationship in any way and it needs to remain transparent and fair."
"Salaams Shaukatbhai and Salimbhai
Thanks for the email.
I can assure you that I have not received it previously.
There is a lot of info that you want delivered and it will take some time.
I appreciate you request and will comply to the best of my ability.
I think your request of things like bank statements, leases, etc especially when there are audited accounts send a very poor message and we will leave it that.
I think we should try and get all matters between us 'squared' and we should find settlement solutions to this transaction, January, SA land, monies owed to you, and any other historic issues that you want to discuss.
My conscience is clear and I will deliver what I can.
Unfortunately, your content has not helped but we will make sure that we deal with this respectfully.
Thanks
Regards
Karim"
"Salaams Shaukatbhai and Salimbhai
Hope all is well.
Shaukatbhai and I have spoken last week and as I have informed him, I am going to get this transaction closed off over the next three weeks and also get the FSs for 2015 finalised.
The priority is to get the deal closed and the debt paid off.
This will bring this chapter to an end.
I would also like to suggest that we agree a fee value for the work that I have done on the January settlement and also a value the land owned by Mystic to arrive at a profit share for that land and the Springfield Park industrial units sold off.
Against that we can set off the payments that you have made on our behalf in SA. As regards any outstanding amounts for other matters is concerned eg. Cherry Tree, etc is concerned, I have to go into the archives in the store and there are approx. 200 boxed there for me to go through to locate the files. As far as I remember, we had 'squared' all our books and the only amounts I owed you were the SA payments but there is no issue at my end as I will take your word for it if I cannot locate the papers.
The route I have suggested will enable for the transfer of Mystic over to you locally and bring everything to a close.
I request that you consider my suggestion and look forward to reaching an agreement.
Thanks
Regards
Karim"
"Dear Sirs
We hereby instruct you to transfer the total loan value du from Radcliff Capital Corporation to Flemingo Holdings Anstalt to Mr Karim Issa Mawji at the consideration of EUR 6.5m (Euros six millions five hundred thousand).
Place/date:
Signed by the Principals"
Litigation fee
Account
Mystic River
The investment
Discussion
Summary of conclusions
i) In July 2000 the Moosas appointed Mr Mawji as their agent to oversee their property investments.
ii) From then on Mr Mawji owed them a fiduciary duty and held that role in respect of each of the Schedule Projects.
iii) Mr Mawji has in a number of cases not rendered satisfactory accounts of the Schedule Projects. Mr Mawji provided a range of financial details to the Moosas, including at meetings in 2004 and 2005. The information provided was not in a form that made the investments comprehensible overall. Later meetings did not provide information that allowed the Moosas to understand the position.
iv) I will order an account in common form for each of Forest Hill, Bruntcliffe, Pescod Square and Würzburg as described above.
v) Mr Mawji accepts that no account has been given for Würzburg and that he should account for the outstanding £130,000 in respect of Bruntcliffe.
vi) I will not order an account in common form in respect of Roebuck House and Clarence Mill. It is agreed that MGI owes £77,187 to Flemingo in respect of that project.
vii) The Moosas are beneficial owners of the Ballito land. The investment was different from the Schedule Projects and was intended to disguise the Moosas' interests in the property.